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Tuesday, May 04, 2010

Is the Personal Saving Rate Headed to Seven Percent?

Macroadvisors says the saving rate won't rise as much as some people are expecting:

The Saving Rate Does Not Have to Rise to 7% in the Near Term, Macroavisors: The argument that the personal saving rate is headed to 7% is based on a long-term relationship between the wealth-to-income ratio and the personal saving rate (pictured above) that is assumed to be stable over time. In fact, this long-term relationship shifts for reasons that are well understood. ...

Over the next 2 years, the relationship between the wealth-to-income ratio and the personal saving rate is expected to shift in such a way as to suggest only modest upward pressure on the personal saving rate — enough pressure to suggest an increase to about 3½% — but not nearly enough pressure to raise it to 7%.

Tim Kane of Growthology has a survey of 76 economics bloggers. In the survey that is about to be published, I asked about the saving rate after the economy recovers (74 responses):

In the post-recession economy, the savings rate will ...
 
Answer Options Response Percent Response Count  
 
be substantially higher than before the recession    12%     9  
 
be somewhat higher than before the recession    66%    49  
 
return to its pre-recession level    20%    15  
 
be lower than before the recession     1%     1  

I was in the "somewhat higher" group. Update: here's a visual representation:

Saving-Kaufman

    Posted by on Tuesday, May 4, 2010 at 12:24 AM in Economics, Saving | Permalink  Comments (14)


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